Context: World Trade Organization (WTO) is an intergovernmental organisation that regulates and facilitates international trade among member countries. Experts argue that over the years, the WTO has gradually lost its compass and is in need of massive reforms.
Relevance of the Topic:Mains: WTO: Importance and challenges.
About World Trade Organization
- Origin: WTO came into being in 1995. WTO is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the Second World War.
- Primary Aim: To facilitate smooth, predictable and free trade among nations.
- It has 166 members accounting for 98% of world trade.
- The WTO Secretariat is based in Geneva (Switzerland).
- Non-discrimination principles: Most-Favoured Nation and National Treatment
Challenges faced by WTO
The WTO was expected to perform three functions — the negotiating function, the dispute settlement function, and the trade monitoring function — and it is not able to perform any of them.
- Stalemate in Negotiations: Doha Development Round (2001) remains unresolved due to disagreements between developed and developing nations on issues like agricultural subsidies, industrial tariffs, and services.
- Dysfunctional dispute settlement system: The Appellate body or the dispute settlement mechanism of WTO has also been rendered dysfunctional. The U.S. has blocked appointments to the Appellate body, the ultimate court of appeal. This resulted in pending of many trade disputes at WTO.
- Consensus mechanism: In the WTO, the principle of decision making by consensus has resulted in the slowdown of multilateral agreements, as it requires 100% of the members to go forward.
- Protectionist polices: WTO has been ineffective in controlling protectionist policies pursued by the member countries. E.g.,
- The US misused the “National security clause" to increase import duties on steel and aluminium products from China.
- The recent imposition of Reciprocal Tariffs by the US is a complete erosion of the MFN (most-favoured-nation) principle.
- Misuse of developing country status: Developed economies like Singapore and China have taken unfair advantage of “developing country” status to seek temporary exemptions from commitments under various multilateral trade agreements.
- Inequality in Global Trade: Developing countries often criticise the WTO for favouring developed nations due to imbalances in negotiation power.
Also Read: Should India exit the WTO?
Also Read: WTO Agreement on Fisheries Subsidies
In the wake of rising protectionism, proliferation of exclusionary trade blocks and rising bilateral free trade agreements, it is imperative to reform the WTO system to ensure rule-based multilateral trade across the countries.